Investors holding shares in UK property giant Segro are being encouraged to resist the temptation of short-term gains following an unsolicited takeover bid from US logistics powerhouse Prologis. The all-share proposal, which values Segro at a slight premium to its net asset value, has been labelled 'opportunistic' by Segro's board, who believe it undervalues the company's robust business and promising future.
Segro, with roots stretching back over a century to the Slough Estate, has evolved into a major player in the industrial property sector, specialising in logistics warehouses and data centres across the UK and Europe. Despite its strong market position, the company's shares, which soared above 1,400p in 2021, have since halved to below 750p by mid-June, largely due to rising interest rates. This downturn saw its shares trade at a discount to its net asset value, which itself had fallen by more than a quarter.
Marcus Phayre-Mudge, manager of the £1 billion TR Property Trust, has highlighted the current undervaluation of the industrial property sector. He noted a surge in takeover bids by both listed companies and private equity firms across Europe, indicating a strong corporate appetite for assets that general investors have largely overlooked. Phayre-Mudge points to minimal oversupply, consistent rental growth, and a lack of speculative development as key attractive factors for corporate buyers, contrasting sharply with market conditions seen before the 2008 financial crisis.
The current weighted average discount to net asset value in the sector stands at over 30%, which, while an improvement from the 45% peak discount in 2022, still places it among the cheapest quartiles since 1990. Despite broader challenges facing the property market, such as static population growth in Europe and evolving retail habits, experts like Phayre-Mudge continue to identify niches of undervaluation and growth potential within the sector.
While a takeover of Segro might offer immediate financial benefits to its shareholders, including institutional investors like TR Property Trust, the broader sentiment among some market observers is that such a move would represent a regrettable contraction of the London Stock Exchange. Segro, with a market value of £12 billion, is considered a significant UK asset, and its potential departure is viewed as a dismal outcome for the UK financial landscape in the long term.